EU Trade Commissioner Cecilia Malmström has just announced some new ideas on ISDS, set out in this concept paper. One of the ideas is to move investment arbitration towards being a real "international investment court." Along the same lines, here are some ideas coming from Germany, which also has in mind making investment arbitration more like a court:
EU trade ministers will vote this week on an ambitious German plan to break a stalemate in the EU-US trade talks over settling disputes between companies and governments.
The proposal is a permanent trade court between the EU and the US, with public proceedings and an appeals process to replace the existing system of arbitrary panels settling fights on a case-by-case basis.
Critics, among the loudest coming from within Germany, say the current so-called Investor State Dispute Settlement (ISDS) scheme lacks independence and lets companies attempt to overrule democratically-passed laws.
...
German trade minister Sigmar Gabriel is pushing the alternative. The social democrat is expecting support from his colleagues from France, the Netherlands, Sweden, Denmark and Luxembourg, after they gave an informal nod to the initiative at a meeting in Madrid in February. Austria sees the plan as “principally positive,” according to an official in the economics ministry in Vienna.
The proposal responds to the critique that the current draft in the trade deal operates outside the rule of law, Markus Krajewski, a professor in international law who drafted the 30-page document for Gabriel, told POLITICO.
The text by Markus is here. All the "court" aspects -- appeals mechanisms, judge selections -- are interesting, but I get more excited by the substantive issues. I'm going to focus on just one: General exceptions. The text by Markus says the following in this regard:
Article 12 - General exceptions
Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination nothing in this Agreement shall be construed to prevent the adoption or enforcement of measures by a Contracting Party necessary:
a) to protect public security or to maintain public order only, but only where a genuine and sufficiently serious threat is posed to one of the fundamental interests of society
b) to protect human, animal or plant life or health, including environmental measures;
c) to protect social and labour laws and collective bargaining agreements;
d) to implement its human rights obligations;
e) to preserve the diversity of cultural expressions;
f) for the conservation of living or non-living exhaustible natural resources; and
g) to secure compliance with laws or regulations including those relating to:
(i) the prevention of deceptive and fraudulent practices or to deal with the effects of a default on contracts;
(ii) the protection of the privacy of individuals in relation to the processing and dissemination of personal data and the protection of confidentiality of individual records and accounts;
(iii) safety
It is followed by this explanation:
In WTO law, general exceptions have helped to ensure that a balance is struck between trade interests and non-commercial interests. In traditional BITs, this instrument is only found in isolated instances.
Derogation clauses are one way to exceptionally justify the violation of a standard which applies under international law. They thus foster an appropriate balance between state regulation and private commercial interests. That is why both EU and WTO rules contain derogation clauses for all fundamental freedoms and trade law standards (e.g. Art. 36 TFEU or Art. XX GATT), and the courts or WTO panels have no problems with this. There is no reason to assume that this will be different for bilateral investment treaties. The proposed wording is based on Art. XX GATT, supplemented by further public interests. The qualification that the measures have to be necessary takes up the standard of proportionality familiar from WTO law.
Let me say a couple things about this approach.
First, one very good thing is that this exception applies to all obligations, including fair and equitable treatment. In CETA, last I heard -- but there is "legal scrubbing" going on -- the exceptions do not apply to FET. Now, I don't think the FET obligation is needed at all, but if it is going to be included, the "general exceptions" should apply to it as well, or else not that much has been accomplished.
Second, Markus relies on "necessary" to connect measures to their objectives, and explains that this is similar to GATT Article XX. But it's worth noting that Article XX does not always use "necessary," sometimes using "relating to" or other formulations. I know that some people love "necessity" as a test, but I think it is fair to say that it has caused a lot of controversy, and I wonder if "relating to" is better here. I would also point out that his prudential exception, in Article 15 of the text, does not use the word "necessary."
Finally, the list of policy objectives offered by Markus is a closed one. Perhaps it is worth making it open with language along the lines of "measures that pursue legitimate policy objectives, including the following:"
